41 WTO – is there a future for BHAGWATI’s “spaghetti bowl”?

The Doha Round in WTO looks like being dead in the water. Wails are heard from many shores while protectionist interests frolic behind rhetoric-swept dunes. Has multilateral diplomacy met its ultimate challenge and been found wanting? Temperamentally I hate recriminations, and I’m always looking for a way out – even if the way may be crooked and twisted, and hug the cragged landscape rather than slash through it as a four lane highway would.

What happened? WTO has over 150 member states, all sovereign, and all different in culture and level of economic and political development. In procedural terms: achieving consensus in reasonable time on a reasonably effective package of trade liberalization is probably beyond the current approach of “like-minded groups” concluding on the base of “nothing is agreed until everything is agreed”. Just too many variables – we have Poincaré’s “three and more body problem” – and no predictable outcome can possibly emerge from such “chaotic” conditions. In substantive terms: convergence toward more liberal trading rules got ahead of economic convergence among the economies: economic and political diversity, in the current crisis-overshadowed context – was just too great.

Flashback: Jagdish BHAGWATI – a dyed in the wool free trader – has long berated Free Trade Agreements (FTA) as the scourge of the multilateral trading system[1]. He called these agreements disparagingly “bowl of spaghetti”. That’s just cultural prejudice, by the way: my Italian culture and my own EFTA ties make me love “bowls of spaghetti”.

Serendipity and analogy rule my thinking. Musing early this morning on the structure of our brain, I just happened to compare the current orthodoxy concerning the brain’s structure to a “bowl of parallel decision modules”. A spark had jumped to BAGHWATI’s “spaghetti bowl”: could biology’s systems, I wondered suddenly, provide a useful analogy through which to reassess WTO’s outlook?

Ecology provided a first hopeful lead: how does nature deal with intractable diversity? By isolating small islands of relative homogeneity first within which flimsy structures take foot. Experience is transformative and cumulative: over time these small islands evolve and transform diversity until it is no longer intractable, but complex. Mmm… could FTAs be such “small islands of relative homogeneity”? Let’s think further along these lines, I said to myself.

Genetics now chimed in: Evo-Devo[2] has consigned the orthodoxy of the “bowl of parallel selfish genes[3]” to the dust-heap of natural history. As a (biological) system becomes more complex, it evolves opposite and complementary strategies: parts of it specialize, and parts of it become generic, and “organize” the specialization. “Meta-structures” emerge. Could also this analogy be useful in pointing to an evolutionary future of WTO?

Please note: these are fragments of a conjecture, not a theory. The conjecture’s role is not logically to constrain, but to facilitate imagining possibilities. Reality will discard or add – a Darwinian process by the way.

Assume that groups of countries “specialize” by creating an FTA among each other. We soon have a bevy of FTAs: membership may not be mutually exclusive. FTAs could provide a nourishing soil on which trade liberalization flourishes: it is first tested with like-minded and –structured countries. This is akin to jumping from the edge of the pool rather than the 4 m springboard: it quickly proves “doable” and dispels many a paranoid scenario of instant economic doom. Over time significant benefits ensue and strengthen the case for trade liberalization.

FTAs are not all alike – they come in all sorts of stripes and flavors. They are not just “anything goes” agreements, however. Meta-rules concerning what qualifies as an FTA are set out in Art. XXIV GATT/WTO. They are rather vague: within each FTA “free trade” covering “essentially all the trade” will be achieved over (variable) time. Jurisprudence on FTAs is lacking: these agreements have been notified to WTO, but never approved, or litigated.

If FTAs are akin to specialized body cells, strengthening FTA rules in WTO would tend to enhancing meta-structures, and eventually leading to a differentiated, though integrated, world trading system. In the end FTAs may become effectively obsolete as they are superseded by a final WTO package, or they may become units of a functioning articulated and layered complex system. Whichever way, far from being the wrong turn away from trade multilateralism, here we have a – admittedly somewhat devious – way toward the trade liberalization goal.

To pursue the biological analogy, FTA may be akin to a “free trade vaccine” that allows the national economies to integrate across borders without undue major side-effects. The key is the liberalization experience. Once a national economy learns to react to liberalization by moving on, the fear of being left behind recedes.

A possible collective strategy may then be:

Let “thousand flowers bloom” – i.e. take a benign look at the creation of FTAs;

Improve the working of Art. XXIV by addressing the notifications that are on the table, and trying to distill from experience improved “meta-rules” that better reflect the economic realities;

Directly or indirectly bring “dispute settlement”, which is currently dealt with within an FTA, within the purview of GATT/WTO;

Establish an Art. XXIV jurisprudence. Case law is more context- than principle-driven, and a hopeful half-way house for emergent meta-rules.

Go eventually for a revision of Art. XXIV GATT/WTO.

Protectionist interests have defeated the Doha Round: until economic conditions have changed “WTO-antibodies” nestled in populist politics will prevent any progress on the main road to liberalization. Antibodies are very specific, however. They are less likely to react to changes or improvements in “meta-rules” (like Art. XXIV GATT/WTO). My final and tactical conjecture then is that in the short term focusing on FTAs and FTA meta-rules in WTO will be less controversial than a direct multilateral approach. Waiting for Godot…

I’ll agree at any time that this adaptive strategy is neither orderly nor predictable. In pursuit of freer trade, however, I’m prepared for fustigation even with “al dente” noodles. Of course the outcome will be imperfect. But as in the eponymous movie with Marylyn Monroe: if one “likes it hot” one has also to accept its ending quit: “no one is perfect”.

[2] See Sean B. CARROLL (2005): Endless forms most beautiful. The new science of Evo Devo. Norton, New York. This new genetics science explains how the development of the body is organized by meta-genes, which tell “normal” genes whether to become active or not. That’s how a body-plan emerges for the individual.

[3] Richard DAWKINS is the leading proponent of this view. See: Richard DAWKINS (+976): The Selfish gene.

I think you are quite right on this one, Aldo. The world has changed from the early GATT/WTO Rounds that picked all the “low-hanging fruit” of trade liberalization and even among ostensibly free-trade nations the final challenges are the most difficult ones….witness Canada’s position on supply-management in agriculuture which has worn-out our welcome in some circles. Protectionist forces and the gap between more liberal trading rules and economic convergence among the economies have proven to be too much. To which one can add the awakening of countries such as the BRIC who are no longer content to sit on their hands and wait for the big boys (Europe, USA, Japan with cameo appearances by Australia, Canada, maybe NZ) to present a fait accompli for signature. These countries are full and active partners with their own axes to grind from the very beginning and none of that is going to change.

So the route you posit strikes me as a positive one: gain experience and comfort with freer trade through networks of FTAs and then somehow build on these as a basis for a broader multilateral structure.